Microlending pioneer, Kiva, is embarking on a new mission. After Kiva made waves when it began extending microloans to U.S. business owners (alongside its usual roster of borrowers from developing countries), the company has announced that it’s expanding its U.S. borrower program through the launch of The Kiva City Program.
The Kiva City Program, which was announced Wednesday by former President Bill Clinton at the Clinton Global Initiative America conference in Chicago, is essentially a new distribution model that Kiva hopes will spur economic development in some of U.S. cities that were the hardest hit by the recession. Kiva will be working in partnership with Visa, with whom it teamed up last August to expand U.S. business owners’ access to mKiva microloans. At the same time, Kiva was also set its sights on the Gulf Coast and paired up with ACCION Texas-Louisiana to help local residents get back on their feet.
The Kiva City Program will be essentially taking the model that Kiva used in the Gulf Coast to other cities in the country by teaming up with local organizations to source local businesses, help them apply for a microloan, and funding the loan on Kiva. The goal is to directly focus Kiva microlending efforts on cities that have taken the most significant economic hits. A study commissioned by Kiva and Visa found that 20 of the 50 largest metropolitan areas in the U.S. lost at least 1% of their small businesses between 2006 and 2008.
Detroit, which ranked fifth in the study’s list of the hardest hit cities, will be the first Kiva City, and Kiva will be working with Michigan Corps and ACCION USA to help Detroit small-business owners get access to capital to finance their operations.
Other regions on in the Kiva-Visa study which, like Detroit, saw decreases in employment of at least 5% include Cleveland/Elyria/Mentor, Ohio; Miami/Fort Lauderdale/Pompano Beach, Florida; Pittsburgh, Pennsylvania; Columbus, Ohio; Orlando/Kissimmee, Florida; Minneapolis/St. Paul/Bloomington, Minnesota/Wisconsin; Kansas City, Missouri/Kansas; Providence/New Bedford/Fall River, Rhode Island/Massachusetts; and Milwaukee/Waukesha/West Allis, Wisconsin.
As Kiva explains in a blog post, each Kiva City will operate as an alliance between four groups: Kiva, civic leaders (such as mayors, state and congressional representatives, and other elected officials), community organizations that can help businesses apply for Kiva loans, and financial institutions or field partners.
“Since launching in the U.S. two years ago, we have worked with our partners to replicate our successful global model, empowering each and every American to help our economy by adding as little as $25 to a small business owner’s loan,” said Kiva President Premal Shah, in a statement. “But as our study shows, the needs in the U.S. are widespread and many regions simply don’t have microfinance institutions operating at scale. Now, spurred by Visa’s commitment to small business, we are able to expand our reach and, as a result, open new avenues of capital for small business owners across the country.”
Of course, not everyone was happy with Kiva’s decision to extend its microlending platform to U.S. borrowers, considering the fact that the average U.S. borrower requests a loan of some $7,000, which is as much as ten times the amount the average borrower from a developing country requests. But if Kiva is looking to expand its U.S. offerings, then obviously it has seen a reasonable amount of success lending to U.S. borrowers, despite the flamers.